Banks Report Substantial Foreign Exchange Gains Amidst Government’S Proposed Tax Windfall.

Nigeria’s leading commercial banks have announced substantial gains in foreign currency revaluation, amounting to an estimated N3.37 trillion for the year 2023 and the first quarter of 2024. These figures were revealed in the financial statements of the banks for the fiscal year 2023 and the first quarter results of 2024.

As part of the government’s Renewed Hope Agenda, proposed amendments to the 2023 Finance Act include the introduction of a one-time windfall tax on the banks’ realized forex gains stated in their 2023 financial reports. The aim of this tax is to generate funds for capital infrastructure development, education, healthcare, and welfare initiatives.

While the implementation of the one-time windfall tax may have positive effects on economic stability and social welfare, it is important to note that it will also impact the net profits of the banks, potentially reducing their bottom lines and affecting shareholders’ wealth.

According to reports, the banks earned a total of N2.4 trillion in 2023 and an additional N883 billion in the first quarter of 2024. However, it should be noted that a significant portion of these gains were unrealized and therefore are not subject to the proposed tax.

The significant forex gains reported by the banks were largely driven by the substantial devaluation of the Nigerian naira, following the Central Bank’s unification of exchange rate markets.

Among Nigerian banks, Guaranty Trust Bank (GTCO) recorded the highest forex gain, amounting to N844.450 billion for the period between 2023 and the first quarter of 2024. This considerable gain greatly contributed to the bank’s profitability, resulting in a pre-tax profit of N509.349 billion in the first quarter of 2024.

Zenith Bank Plc reported forex gains of N828.675 billion, with N638.982 billion in 2023 and N189.693 billion in the first quarter of 2024. Zenith Bank attributed its growth in profitability to significant increases in both interest and non-interest income.